chapter 9

Question 1

five levels of economic integration

Answer 1

1. Free trade area
2. Customs union
3. Common market
4. Economic union
5. Political union

Question 2

Free trade area

Answer 2

All barriers to the trade of goods and services are removed, but Each member determines its own trade policies with nonmembers

Question 3

2. Customs union

Answer 3

Adopts a common external trade policy such as common external tariff rates

Question 4

3. Common market

Answer 4

More extensive common external trade policy
The free movement of the factors of production
Requires significant harmony among members in fiscal, monetary, and employment policies

Question 5

4. Economic union

Answer 5

Adoption of a common external trade policy
Free flow of products and factors of production
Common currency
Common monetary and fiscal policy
Central bank
Harmonization tax rates
Involves sacrificing a significant amount of national sovereignty
The European Union (EU)

Question 6

5. Political union

Answer 6

Independent states are combined into a single union
Coordinate economic, social, and foreign policy
The EU is headed toward at least partial political union.
The United States is an example of political union

Question 7

economic impact for integration

Answer 7

attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under international agreements such as the WTO

Question 8

political case for integration

Answer 8

Politically, integration is attractive:
Makes them more dependent on each other.
Forms a structure where they regularly have to interact.
Members have greater clout and are politically much stronger in dealing with other nations.
The likelihood of violent conflict and war will decrease

Question 9

why integration is not easy

Answer 9

because it can be costly and cause a loss of national sovereignty. It is extremely difficult to exit Brexit

Question 10

The EU

Answer 10

has 27 nations. Bigger than the US

Question 11

impact of EU on the single market

Answer 11

maximize efficiency, uneven impact on unemployment, elimination of small/ less efficient firms, cultural identities and political sovereignty may be lost

Question 12

The Euro

Answer 12

only 19 out of 27 EU states adopted the euro

Question 13

benefits of the euro

Answer 13

Savings from using only one currency
Easy to compare prices, resulting in lower prices
Forces efficiency and slashing costs
Creates liquid pan-Europe capital market
Increases range of investments for individuals and institutions

Question 14

costs of the euro

Answer 14

Countries lose monetary policy control
European Central Bank controls policy for the “Euro zone”
Country economies are different: tax, wage, business cycles
Euro puts the economic cart before the political horse

Question 15

The NAFTA

Answer 15

north American free trade agreement

Question 16

pros of nafta

Answer 16

Enlarged and productive regional base
Labor-intensive industries move to Mexico
Mexico gets investment and employment
Increased Mexican income to buy US/Canada goods
Demand for goods increases jobs
Consumers get lower prices
Agricultural exports

Question 17

cons of nafta

Answer 17

Loss of (labor intensive) jobs to Mexico
Mexican firms have to compete against efficient US/Canada firms
Mexican firms become more efficient and competitive
Environmental degradation
Loss of national sovereignty

Question 18

Has the impact of NAFTA positive or negative

Answer 18

small but positive

Question 19

ASEAN

Answer 19

Association of Southeast Asian Nations - fosters freer trade between member countries and cooperation in their industrial policies

Question 20

APEC

Answer 20

Asia Pacific Economic Cooperation – slow progress because its too large

Question 21

TPP

Answer 21

Trans-Pacific Partnership